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Yellow Pages Income Fund has been on a tear over the past 10 weeks, rising 32 per cent, partly on upbeat views on the company's $225-million takeover of CanPages. Despite the gains, the yield on the units is still close to 12 per cent, raising the question of whether this is a recovery worth joining.

Scott Cuthbertson, an analyst at TD Newcrest, resumed coverage on the units with a lukewarm "hold" recommendation and a 12-month target price of $6.50 - a little below their current level, which implies investors will receive nothing more than the monthly payout.

He agrees that the CanPages deal is a "reasonable" one that gives Yellow Pages greater market share in Western Canada and better online properties. However, the medium-to-long term story is a little fuzzier because the company's revenues lag economic downturns and recoveries. In other words, even as the economy shows more signs of recovering, Yellow Pages' revenue from its print directories won't hit bottom until the second half of the year.

Mr. Cuthbertson explains: "Once the renewal cycle catches up to the economy, the expectation is that print directory revenues will migrate at a pace of approximately -2 per cent to -3 per cent with this decline more than made up by growth in other areas of the core business. Accordingly, investors may have to wait until February 2011 when the Q4, 2010 results are released to see clear evidence of the resumption of directory growth if Q3 is a 'transition' quarter."

Yellow Pages is scheduled to report its first quarter results on May 6.